Company Raises Fiscal 2006 Earnings Guidance MELBOURNE, Fla., Jan.
25 /PRNewswire-FirstCall/ -- Harris Corporation (NYSE:HRS) today
announced significant increases in revenue and non-GAAP net income
for the second quarter of fiscal year 2006. Revenue in the second
quarter increased 14 percent to $842 million. GAAP net income for
the second quarter of fiscal year 2006 was $30.0 million, and
earnings were $.22 per diluted share. Non-GAAP net income was $72.5
million, or $.52 per diluted share, after excluding charges
totaling $42.5 million after-tax, or $.30 per share. Second quarter
charges are related to the previously announced discontinuance of
legacy international microwave products, the acquisition of Leitch
Technology, and cost-reduction actions in the Broadcast
Communications segment that began in the first quarter of fiscal
year 2006. Details related to these charges are provided in the
attached Reconciliation of Non-GAAP Financial Measures (Tables 5,
6, and 7) and accompanying notes. The company also increased
non-GAAP earnings guidance for fiscal year 2006 to a range of $2.05
to $2.15 per diluted share. On a GAAP basis, including estimated
charges of $.49 per share associated with the above actions,
earnings guidance for fiscal year 2006 is a range of $1.56 to $1.66
per share. Revenue growth for the company in fiscal year 2006 is
expected to be in the range of 13 - 15 percent above fiscal year
2005. "Harris delivered another solid quarter of revenue and
non-GAAP earnings growth," said Howard L. Lance, chairman,
president and chief executive officer. "Customer demand for
tactical radios at our RF Communications business remains very
strong. Demand is improving for digital products, systems, and
software at our Microwave and Broadcast businesses, and cost-
reduction actions are delivering increased margins. Program
execution and profitability at our Government Communications
Systems business remain solid." Government Communications Systems
Revenue in the Government Communications Systems segment was $443.5
million in the second quarter, compared to $447.3 million in the
year- ago quarter. The year-ago quarter benefited from $22 million
in revenue from the Iraqi Media Network (IMN) program.
Sequentially, revenue increased 3 percent. Operating income was
$53.9 million, compared to $53.1 million in the prior-year quarter.
Ongoing strength in operating margin resulted from excellent
program execution and a continued high mix of fixed-price
production programs. Year-over-year revenue in the second quarter
increased in the Department of Defense and the Technical Services
program areas and, excluding IMN, revenue also increased in the
Civil programs area. Lower revenue was reported in the National
programs area where budget constraints impacting the intelligence
community have delayed the implementation of several classified
programs. Programs that experienced year-over-year growth in the
quarter included the $1 billion, 10-year Patriot technical services
program for the National Reconnaissance Office; the $2.2 billion
FAA Telecommunications Infrastructure program; the FAB-T satellite
communications program for U.S. Air Force strategic aircraft; the
three-year, $77 million RADIC program to provide
knowledge-management software systems for the National Security
Agency (NSA); and the F/A-18 Fighter program, in which Harris is
providing a variety of networking equipment for pilot situational
awareness. Quarterly revenue also benefited from growing sales for
the segment's commercial satellite antenna products. New program
wins during the quarter included a three-year, $27 million program
to develop and integrate a communications system that will link the
U.S. Navy's Advanced Deployable System undersea surveillance
sensors with host Littoral Combat Ships; a $5 million contract that
expands work scope on the F/A-18 Fighter; a $20 million follow-on
contract for a Multifunctional Information Distribution System for
naval aircraft; an $8 million follow-on contract for In-flight
Interceptor Communications System data terminals for the U.S.
Missile Defense Agency; a $40 million contract extension from the
U.S. Census Bureau for the $210 million MAF/TIGER database
modernization program; and a potential 5-year, $90 million
technical services contract to provide the U.S. Army with
information systems engineering and information technology
services. Harris also received an $8 million initial design and
development contract to provide ground terminals for the National
Oceanographic and Atmospheric Administration's GOES-R weather
satellite program. GOES-R has a potential program value, following
the down-select, of $750 million to $1 billion. RF Communications
Revenue in the RF Communications segment was $180.8 million in the
second quarter, a 55 percent increase compared to the year-ago
quarter. Orders for the first half of fiscal year 2006 were up 50
percent, compared to the first half of fiscal year 2005. Sales and
orders were higher in both U.S. and international markets.
Operating income in the quarter was $61.5 million. Harris continues
to increase investment in new products, including development of
the new Falcon(R) III radios. Strong sales to U.S. Department of
Defense customers reflected increased order momentum for tactical
radios. During the quarter, Harris was awarded a potential $205
million contract for AN/PRC-117F(C) multiband radios as part of the
U.S. Marine Corps' ongoing communications standardization program.
The company received an initial $67 million order against this
contract. Also in the quarter, the Marine Corps increased the
ceiling value on a five-year contract from $75 million to a
potential $586 million and awarded Harris an additional order of
$52 million under the contract for high-frequency (HF)
AN/PRC-150(C) Falcon(R) II radios. Orders were also placed by
several classified customers for the segment's new AN/PRC-152(C)
Falcon III hand-held radios, which provide interoperability with
key legacy waveforms, including SINCGARS. The segment won a $2
million contract from USCENTCOM, the first for its new Falcon
Watch(TM) advanced sensor system. Falcon Watch(TM) offers remote,
unattended intrusion detection and surveillance capabilities
ideally suited to the defense of installations and perimeters.
International orders in the quarter demonstrated the continued
expansion of market opportunities for the Harris Falcon(R) family
of tactical radios. Significant new orders were received from the
governments of Ethiopia, Angola, and Tajikistan. In addition,
Harris received orders for its Type 1 encrypted secure radios from
the governments of Canada and Australia, which are among the few
governments that have received permission from the U.S. government
to purchase Harris Type 1 secure tactical radios. Following the
close of the quarter, Harris was awarded a $9 million order for
Falcon II HF radios for the Iraq Ministry of Defense. The radios
will provide a tactical communications backbone and
interoperability between U.S. and Iraqi forces. Microwave
Communications Revenue in the Microwave Communications segment was
$89.2 million in the second quarter, compared to $85.5 million in
the prior-year quarter. Orders for the first half of fiscal 2006
increased 21 percent, compared to the prior- year period, and
reflected significantly higher demand in the international market.
The segment reported a GAAP operating loss of $29.5 million in the
second quarter, reflecting a $35.5 million pre-tax charge
associated with the previously announced second quarter end-of-life
program for a number of international radios, including the
MicroStar(TM) M/H, MicroStar(TM) L, Galaxy(TM), and Clearburst(TM)
families. The success and rapid market acceptance of the new
TRuepoint(TM) family of radios, which are replacing legacy radios,
accelerated the product discontinuance plan. Sales of TRuepoint
radios have consistently exceeded expectations. Non-GAAP operating
income, excluding the charges, was $6.0 million in the second
quarter, compared to $2.6 million in the prior year. Higher sales
volume and an increased mix of TRuepoint products resulted in an
operating margin, excluding the charges, of 6.7 percent in the
second quarter of fiscal year 2006. Market demand for Harris
microwave radios during the quarter continued to be strong in North
America, reflecting increased requirements by mobile operators,
utilities, right-of-way networks, and private and government
networks. The Microwave segment had another strong quarter for
international orders due to improving market conditions and
worldwide demand for new TRuepoint radios. International market
conditions continue to improve as network expansions and new
network builds, including 3G networks, increase microwave
requirements. International orders reflected a broadening customer
base, with regional strength in the Middle East, Africa, Latin
America, and Europe. During the quarter, significant international
orders were received from VeeNetworks in Nigeria, MTN Nigeria,
Umniah Mobile Company in Jordan, Beltel (Gazprom) Russia,
Radiocomunicatii Romania, Nextel Mexico, and Brasil Telecom.
Broadcast Communications Revenue in the Broadcast Communications
segment was $135.4 million in the second quarter, compared to $98.9
million in the prior-year quarter. Revenue in the second quarter
benefited from the acquisition of Leitch Technology, acquired in
October 2005, and Encoda Systems, acquired in November 2004. GAAP
operating income was $3.2 million. Non-GAAP operating income was
$14.9 million, excluding previously announced charges in the
quarter of $11.7 million associated with the acquisition of Leitch
and cost-reduction actions that began in the first quarter of
fiscal year 2006. Excluding these charges, operating margin reached
11.0 percent. Improved margin performance reflects the impact of
higher-margin product lines from acquired companies and
cost-reduction actions. Leitch Technology sales were strong in the
quarter, with double-digit growth compared to the prior-year
quarter. Growth occurred in all product areas, fueled by new
digital product introductions. The Leitch product portfolio has
further strengthened the company's position as the leading end-
to-end provider of total content delivery solutions. Major orders
for the segment during the quarter included digital TV transmission
equipment for Gray Communications and Entravision Communications in
the U.S.; TV equipment for Radiocomunicatii in Romania; digital
radio transmitters and exciters for Clear Channel Communications in
the U.S.; and digital software systems for Swisscom Broadcasting,
BridgeNetworks in Australia, and KUB Telekomunikasi in Malaysia.
Outlook "Our financial performance in the first half of the fiscal
year has exceeded expectations," Lance said. "Our recent
acquisitions are performing on plan and contributing to growth and
earnings expansion. We see strength in demand and profitability
continuing at RF Communications, and we expect further improvements
at Microwave and Broadcast in the second half. Harris will continue
to benefit from its diverse portfolio of businesses, serving a
variety of government and commercial communications markets."
Harris will host a conference call today at 5:00 p.m., Eastern
Time, to discuss the above items. Interested individuals are
invited to listen to the call by using a dial-in number: (719)
457-2625, access code: 2244797. The conference call also will be
broadcast live via the Internet at http://www.harris.com/ . A
replay of the teleconference will be available beginning at 8:00
p.m., Eastern Time, and will run until midnight, Eastern Time, on
Wednesday, February 1. To access the replay, please call (719)
457-0820, access code: 2244797. A recording of the call will also
be available on Harris' website beginning at 7:00 p.m., Eastern
Time, on January 25. Harris is an international communications and
information technology company serving government and commercial
markets in more than 150 countries. With headquarters in Melbourne,
Florida, the company has annual sales of over $3 billion and has
more than 13,000 employees -- including 5,500 engineers and
scientists -- dedicated to the development of best-in-class assured
communications(TM) products, systems, and services. The company's
operating divisions serve markets for government communications, RF
communications, broadcast communications, and microwave
communications. Additional information about Harris Corporation is
available at http://www.harris.com/ . Non-GAAP Financial Measures
This press release contains non-GAAP financial measures within the
meaning of Regulation G promulgated by the SEC, including earnings
per share for the second quarter and fiscal 2006 earnings-per-share
guidance excluding the impact of any charges associated with
inventory write-downs in the Microwave segment, cost-reduction
items in our Broadcast Communications segment, and the
acquisition-related costs associated with our Leitch acquisition.
Harris management believes that these non-GAAP financial measures,
when considered together with the GAAP financial measures, provide
information that is useful to investors in understanding
period-over-period operating results separate and apart from items
that may, or could, have a disproportionately positive or negative
impact on results in any particular period. Management also
believes that these non-GAAP financial measures enhance the ability
of investors to analyze Harris business trends and to better
understand the company's performance. In addition, the company may
utilize non-GAAP financial measures as a guide in its forecasting,
budgeting, and long-term planning process and to measure operating
performance for some management compensation purposes. Any analysis
of non-GAAP financial measures should be used only in conjunction
with results presented in accordance with GAAP. Forward-Looking
Statement Statements in this press release that are not historical
facts are forward-looking statements that reflect management's
current expectations, assumptions, and estimates of future
performance and economic conditions. Such statements are made in
reliance upon the safe harbor provisions of Section 27A of the
Securities Act of 1933 and Section 21E of the Securities Exchange
Act of 1934. Forward-looking statements in this release include but
are not limited to: earnings guidance for fiscal 2006, the
potential value of contract awards and potential contract awards,
and statements regarding outlook, including expected revenue
growth. The Company cautions investors that any forward-looking
statements are subject to risks and uncertainties that may cause
actual results and future trends to differ materially from those
matters expressed in or implied by such forward-looking statements.
The Company's consolidated results and the forward-looking
statements could be affected by many factors, including but not
limited to: our participation in markets that are often subject to
uncertain economic conditions which makes it difficult to estimate
growth in our markets and, as a result, future income and
expenditures; our dependence on the U.S. government for a
significant portion of our revenues, and the loss of this
relationship or a shift in U.S. government funding could have
adverse consequences on our future business; potential changes in
U.S. government or customer priorities due to program reviews or
revisions to strategic objectives, including termination of or
potential failure to fund U.S. government contracts; risks inherent
with large long-term fixed-price contracts, particularly the
ability to contain cost overruns; the performance of critical
subcontractors or suppliers; financial and government and
regulatory risks relating to international sales and operations,
including fluctuations in foreign currency exchange rates and the
effectiveness of our currency hedging program; our ability to
continue to develop new products that achieve market acceptance;
the consequences of future geo-political events, which may affect
adversely the markets in which we operate, our ability to insure
against risks, our operations or our profitability; strategic
acquisitions and the risks and uncertainties related thereto,
including our ability to manage and integrate acquired businesses;
potential claims that we are infringing the intellectual property
rights of third parties; the successful resolution of patent
infringement claims and the ultimate outcome of other
contingencies, litigation and legal matters; customer credit risk;
the fair values of our portfolio of passive investments, which
values are subject to significant price volatility or erosion;
risks inherent in developing new technologies; the potential impact
of hurricanes on our operations in Florida and the potential impact
of earthquakes on our operations in California; the ability to
recruit and retain qualified personnel; and general economic
conditions in the markets in which we operate. Further information
relating to factors that may impact the Company's results and
forward-looking statements are disclosed in the Company's filings
with the SEC. Harris disclaims any intention or obligation, other
than imposed by law, to update or revise any forward-looking
statements, whether as a result of new information, future events,
or otherwise. Financial Tables follow. Table 1 HARRIS CORPORATION
FY'06 Second Quarter Summary Consolidated Statement of Income
Quarter Ended Two Quarters Ended Dec. 30, Dec. 31, Dec. 30, Dec.
31, 2005 2004 2005 2004 Revenue from product sales and services
$841.6 $737.2 $1,601.3 $1,406.6 Cost of product sales and services
(602.3) (540.2) (1,137.1) (1,044.3) Engineering, selling and
administrative expenses (171.0) (124.2) (312.5) (225.2)
Non-operating income (loss) (0.2) (3.5) (0.8) (5.2) Interest income
3.0 1.6 6.2 3.9 Interest expense (10.1) (6.0) (16.5) (12.0) Income
before income taxes 61.0 64.9 140.6 123.8 Income taxes (31.0)
(19.8) (60.3) (38.6) Net income $ 30.0 $ 45.1 $ 80.3 $ 85.2 Net
income per common share Basic $ .23 $ .34 $ .61 $ .64 Diluted $ .22
$ .33 $ .58 $ .62 Cash dividends paid per common share $ .08 $ .06
$ .16 $ .12 Basic weighted average shares outstanding 132.9 132.9
132.6 132.7 Diluted weighted average shares outstanding 141.7 141.7
141.4 141.3 Table 2 HARRIS CORPORATION FY'06 Second Quarter Summary
Business Segment Information Quarter Ended Two Quarters Ended Dec.
30, Dec. 31, Dec. 30, Dec. 31, 2005 2004 2005 2004 Revenue
Government Communications Systems $ 443.5 $ 447.3 $ 876.0 $ 879.5
RF Communications 180.8 116.3 351.7 229.6 Microwave Communications
89.2 85.5 164.5 154.9 Broadcast Communications 135.4 98.9 223.1
166.3 Corporate eliminations (7.3) (10.8) (14.0) (23.7) $ 841.6 $
737.2 $1,601.3 $1,406.6 Income Before Income Taxes Segment
Operating Income (Loss): Government Communications Systems $ 53.9 $
53.1 $ 107.3 $ 98.2 RF Communications 61.5 32.4 119.6 63.9
Microwave Communications (29.5) 2.6 (26.5) 3.5 Broadcast
Communications 3.2 1.0 (8.8) 3.3 Headquarters expense (15.7) (13.6)
(31.2) (27.4) Corporate eliminations (5.1) (2.7) (8.7) (4.4)
Non-operating income (loss) (0.2) (3.5) (0.8) (5.2) Net interest
(7.1) (4.4) (10.3) (8.1) $ 61.0 $ 64.9 $ 140.6 $ 123.8 Table 3
HARRIS CORPORATION FY'06 Second Quarter Summary CONSOLIDATED
STATEMENT OF CASH FLOWS Two Quarters Ended Dec. 30, Dec. 31, 2005
2004 (In millions) Operating Activities Net income $ 80.3 $ 85.2
Adjustments to reconcile net income to net cash provided by (used
in) operating activities: Depreciation and amortization 44.5 39.5
Non-current deferred income tax (33.1) 4.5 Loss (gain) on the sale
of securities available-for-sale -- 3.1 (Increase) decrease in:
Accounts and notes receivable 25.4 12.3 Inventories (28.3) (21.4)
Increase (decrease) in: Accounts payable and accrued expenses
(46.8) (48.7) Advance payments and unearned income 16.0 3.0 Income
taxes 38.1 (7.6) Other 13.2 20.8 Net cash provided by operating
activities 109.3 90.7 Investing Activities Cash paid for acquired
businesses (443.5) (426.4) Additions of plant and equipment (35.7)
(34.4) Additions of capitalized software (18.9) (5.9) Proceeds from
the sale of securities available-for-sale -- 13.1 Net cash used in
investing activities (498.1) (453.6) Financing Activities Proceeds
from borrowings 321.1 69.4 Payment of borrowings (23.0) (76.8)
Proceeds from exercise of employee stock options 20.0 22.8
Repurchase of common stock (6.0) (36.2) Cash dividends (21.3)
(16.0) Net cash provided by (used in) financing activities 290.8
(36.8) Effect of exchange rate changes on cash and cash equivalents
(1.5) 2.6 Net (decrease) in cash and cash equivalents (99.5)
(397.1) Cash and cash equivalents, beginning of year 377.6 627.5
Cash and cash equivalents, end of period $ 278.1 $ 230.4 Table 4
HARRIS CORPORATION FY'06 Second Quarter Summary CONDENSED
CONSOLIDATED BALANCE SHEET December 30, July 1, 2005 2005 (In
millions) Assets Cash and cash equivalents $ 278.1 $ 377.6
Receivables 490.6 494.0 Inventories 411.3 347.8 Current deferred
income taxes 113.6 96.0 Plant and equipment 331.7 307.8 Goodwill
906.5 569.9 Identifiable intangible assets 180.4 99.1 Non-current
notes receivable 10.9 13.6 Other assets 162.7 151.6 $2,885.8
$2,457.4 Liabilities and Shareholders' Equity Short-term debt $ 9.0
$ 4.2 Accounts payable and accrued expenses 448.4 441.9 Advance
payments and unearned income 155.0 139.0 Income taxes payable 7.6
5.1 Non-current deferred income taxes 42.4 26.7 Long-term debt
699.8 401.4 Shareholders' equity 1,523.6 1,439.1 $2,885.8 $2,457.4
HARRIS CORPORATION FY'06 Second Quarter Summary RECONCILIATION OF
NON-GAAP FINANCIAL MEASURES AND REGULATION G DISCLOSURE To
supplement our consolidated financial statements presented in
accordance with accounting principles generally accepted in the
United States (GAAP), we provide additional measures of segments'
operating income (loss), net income, and net income per diluted
share adjusted to exclude certain costs, expenses, and losses.
Management of Harris believes that these non- GAAP financial
measures provide information that is useful to investors in
understanding period-over-period operating results separate and
apart from items that may, or could, have a disproportionate
positive or negative impact on results in any particular period.
Management also believes that these non- GAAP measures enhance the
ability of an investor to analyze trends in Harris' business and to
better understand our performance. In addition, the Company may
utilize non-GAAP financial measures as a guide in its budgeting and
long- term planning process and to measure operating performance
for some management compensation purposes. Any analysis of non-GAAP
financial measures should be used only in conjunction with results
presented in accordance with GAAP. A reconciliation of these
non-GAAP financial measures with the most directly comparable
financial measures calculated in accordance with GAAP follows:
Table 5 HARRIS CORPORATION FY'06 Second Quarter Summary
RECONCILIATION OF NON-GAAP FINANCIAL MEASURES Consolidated
Statement Of Income Quarter Ended Quarter Ended December 30, 2005
December 31, 2004 As Adjust- Non- As Adjust- Non- Reported ment
GAAP Reported ment GAAP (In millions, except per share amounts)
Revenue from product sales and services $ 841.6 $ -- $ 841.6 $
737.2 $ -- $ 737.2 Cost of product sales and services (A) (602.3)
35.0 (567.3) (540.2) 4.8 (535.4) Engineering, selling and
administrative expenses (B) (171.0) 12.2 (158.8) (124.2) 3.8
(120.4) Non-operating income (loss) (0.2) -- (0.2) (3.5) -- (3.5)
Interest income 3.0 -- 3.0 1.6 -- 1.6 Interest expense (10.1) --
(10.1) (6.0) -- (6.0) Income before income taxes 61.0 47.2 108.2
64.9 8.6 73.5 Income taxes (31.0) (4.7) (35.7) (19.8) (1.6) (21.4)
Net Income $ 30.0 $42.5 $ 72.5 $ 45.1 $7.0 $ 52.1 Net Income per
diluted common share $ .22 $ .30 $ .52 $ .33 $.05 $ .38 Two
Quarters Ended Two Quarters Ended December 30, 2005 December 31,
2004 As Adjust- Non- As Adjust- Non- Reported ment GAAP Reported
ment GAAP (In millions, except per share amounts) Revenue from
product sales and services $1,601.3 $ -- $1,601.3 $1,406.6 $ --
$1,406.6 Cost of product sales and services (A) (1,137.1) 46.3
(1,090.8) 1,044.3) 4.8 (1,039.5) Engineering, selling and
administrative expenses (B) (312.5) 18.9 (293.6) (225.2) 3.8
(221.4) Non-operating income (loss) (0.8) -- (0.8) (5.2) -- (5.2)
Interest income 6.2 -- 6.2 3.9 -- 3.9 Interest expense (16.5) --
(16.5) (12.0) -- (12.0) Income before income taxes 140.6 65.2 205.8
123.8 8.6 132.4 Income taxes (60.3) (7.6) (67.9) (38.6) (1.6)
(40.2) Net Income $ 80.3 $57.6 $ 137.9 $ 85.2 $7.0 $ 92.2 Net
Income per diluted common share $ .58 $ .41 $ .99 $ .62 $.05 $ .67
Table 6 HARRIS CORPORATION FY'06 Second Quarter Summary
RECONCILIATION OF NON-GAAP FINANCIAL MEASURES Business Segment
Information Quarter Ended Quarter Ended December 30, 2005 December
31, 2004 As Adjust- Non- As Adjust- Non- Reported ment GAAP
Reported ment GAAP (In millions) Revenue Government Communications
Systems $ 443.5 $ -- $ 443.5 $ 447.3 $ -- $ 447.3 RF Communications
180.8 -- 180.8 116.3 -- 116.3 Microwave Communications 89.2 -- 89.2
85.5 -- 85.5 Broadcast Communications 135.4 -- 135.4 98.9 -- 98.9
Corporate eliminations (7.3) -- (7.3) (10.8) -- (10.8) $ 841.6 $ --
$ 841.6 $ 737.2 $ -- $ 737.2 Income Before Income Taxes Segment
Operating Income (Loss): Government Communications Systems $ 53.9 $
-- $ 53.9 $ 53.1 $ -- $ 53.1 RF Communications 61.5 -- 61.5 32.4 --
32.4 Microwave Communications (C) (29.5) 35.5 6.0 2.6 -- 2.6
Broadcast Communications (D) 3.2 11.7 14.9 1.0 8.6 9.6 Headquarters
expense (15.7) -- (15.7) (13.6) -- (13.6) Corporate eliminations
(5.1) -- (5.1) (2.7) -- (2.7) Non-operating income (loss) (0.2) --
(0.2) (3.5) -- (3.5) Net interest (7.1) -- (7.1) (4.4) -- (4.4) $
61.0 $47.2 $ 108.2 $ 64.9 $8.6 $ 73.5 Two Quarters Ended Two
Quarters Ended December 30, 2005 December 31, 2004 As Adjust- Non-
As Adjust- Non- Reported ment GAAP Reported ment GAAP (In millions)
Revenue Government Communications Systems $ 876.0 $ -- $ 876.0 $
879.5 $ -- $ 879.5 RF Communications 351.7 -- 351.7 229.6 -- 229.6
Microwave Communications 164.5 -- 164.5 154.9 -- 154.9 Broadcast
Communications 223.1 -- 223.1 166.3 -- 166.3 Corporate eliminations
(14.0) -- (14.0) (23.7) -- (23.7) $1,601.3 -- $1,601.3 $1,406.6 --
$1,406.6 Income Before Income Taxes Segment Operating Income
(Loss): Government Communications Systems $ 107.3 $ -- $ 107.3 $
98.2 $ -- $ 98.2 RF Communications 119.6 -- 119.6 63.9 -- 63.9
Microwave Communications (C) (26.5) 35.5 9.0 3.5 -- 3.5 Broadcast
Communications (D) (8.8) 29.7 20.9 3.3 8.6 11.9 Headquarters
expense (31.2) -- (31.2) (27.4) -- (27.4) Corporate eliminations
(8.7) -- (8.7) (4.4) -- (4.4) Non-operating income (loss) (0.8) --
(0.8) (5.2) -- (5.2) Net interest (10.3) -- (10.3) (8.1) -- (8.1) $
140.6 $65.2 $ 205.8 $ 123.8 $8.6 $ 132.4 Table 7 HARRIS CORPORATION
FY'06 SUMMARY OF NON-GAAP CHARGES Quarter Ended Quarter Ended
September 30, 2005 December 30, 2005 After- After- Pre-Tax Tax EPS
Pre-Tax Tax EPS (In millions, except per share amounts) BCD Cost
Reduction (D) $18.0 $15.1 $0.11 $ 5.2 $ 3.6 $0.02 Leitch
Acquisition Costs (D) -- -- -- 6.5 6.5 0.05 MCD Product
Discontinuances (C) -- -- -- 35.5 32.4 0.23 $18.0 $15.1 $0.11 $47.2
$42.5 $0.30 Fiscal Year (Forecasted) 2006 After- Pre-Tax Tax EPS
(In millions, except per share amounts) BCD Cost Reduction(D) $30.0
$24.7 $0.17 Leitch Acquisition Costs (D) 8.5 7.9 0.06 MCD Product
Discontinuances (C) 40.5 37.4 0.26 $79.0 $70.0 $0.49 HARRIS
CORPORATION FY'06 Second Quarter Summary RECONCILIATION OF GAAP TO
NON-GAAP MEASUREMENTS Notes to tables 5, 6, and 7: Note A -
Adjustments to cost of product sales and services for the quarter
and two quarters ended December 30, 2005 include inventory
write-downs related to product discontinuances in the Microwave
Communications segment ($35.0 million). Adjustments to cost of
product sales and services for the two quarters ended December 30,
2005 also include inventory write-downs associated with previously
announced cost reduction actions including the transfer of European
manufacturing to the United States and outsourcing of other
manufacturing activity in the Broadcast Communications segment
($11.3 million). Adjustments to cost of product sales and services
for the quarter and two quarters ended December 31, 2004, relate to
impairment losses on capitalized software development costs ($4.8
million) associated with our acquisition of Encoda Systems, Inc.
("Encoda"). Note B - Adjustments to engineering, selling and
administrative expenses for the quarter and two quarters ended
December 30, 2005 include the write-off of in-process research and
development ($3.6 million) and other expenses ($2.9 million)
associated with our acquisition of Leitch Technology Corporation
("Leitch") and severance costs associated with product
discontinuances in the Microwave Communication segment ($0.5
million). Adjustments to engineering, selling and administrative
expenses also include severance and other costs associated with
previously announced cost reduction actions including the transfer
of European manufacturing to the United States and outsourcing of
other manufacturing activity in the Broadcast Communications of
$5.2 million for the quarter ended December 30, 2005 and $23.2
million for the two quarters ended December 30, 2005. Adjustments
to engineering, selling and administrative expenses for the quarter
and two quarters ended December 31, 2004, relate to the write-off
of in-process research and development ($3.8 million). Note C -
Adjustments to the Microwave Communications segment operating
income for the quarter and two quarters ended December 30, 2005
relate to the inventory write-downs and severance costs associated
with product discontinuances in the Microwave Communications
segment ($35.5 million). We expect to have an additional $5 million
of costs related to these product discontinuances in the second
half of fiscal 2006 primarily due to the shut- down of our
manufacturing activities in Montreal, Canada. Note D - Adjustments
to the Broadcast Communications segment operating income for the
quarter and two quarters ended December 30, 2005 include the
write-off of in-process research and development ($3.6 million) and
other expenses ($2.9 million) associated with our Leitch
acquisition. Adjustments to Broadcast Communications segment
operating income include inventory write- downs associated with
previously announced cost reduction actions including the transfer
of European manufacturing to the United States and outsourcing of
other manufacturing activity in the Broadcast Communications
segment of $5.2 million for the quarter ended December 30, 2005 and
$23.2 million for the two quarters ended December 30, 2005. The
adjustments to Broadcast Communications segment operating income
for the quarter and two quarters ended December 31, 2004, relate to
the write-off of in-process research and development ($3.8
million), and impairment losses on capitalized software development
costs ($4.8 million) associated with our acquisition of Encoda
Systems, Inc. We expect to have an additional $7 million of costs
related to the cost-reduction actions and an additional $2 million
of costs associated with the Leitch acquisition in the second half
of fiscal 2006. For additional information, contact Harris
Corporation at . DATASOURCE: Harris Corporation CONTACT: Investor
relations, Pamela Padgett, +1-321-727-9383, or , or Media, Tom
Hausman, +1-321-727-9131, or , both of Harris Corporation Web site:
http://www.harris.com/
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